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• Dow Jones and S&P 500 remain stable, while Nasdaq edges up 0.3% as investors brace for a busy week of corporate earnings, including Bank of America, Morgan Stanley, Goldman Sachs, United Airlines, Tesla, and Netflix.
• S&P 500 companies are expected to report a 7.6% decline in Q2 earnings compared to the previous year, according to FactSet data, with a slight increase from the -7.1% estimate last Friday.
• Disappointing growth figures from China weigh on market sentiment, impacting risk appetite.
• Economic calendar features key data such as retail sales, industrial production, housing starts, and building permits, while Fed officials remain silent during the “blackout period” ahead of the FOMC monetary policy decision next week.
• Dollar index stays below 100, hitting fifteen-month lows after softer US inflation data sparks expectations that the Federal Reserve’s tightening cycle may be nearing its end.
• Fed likely to raise interest rates by 25 basis points this month, but market pricing suggests the possibility of rate cuts next year.
• US consumer sentiment reaches a near two-year high in July, boosting optimism.
• Focus shifts to upcoming retail sales, industrial production, and housing data, along with major corporate earnings reports.
• Dollar weakens against the euro and sterling but recovers slightly against the Australian and New Zealand dollars.
• US 10-year Treasury note yield hovers around 3.78%, near late June’s low levels, as market participants assess economic and monetary policy outlook.
• Market expectations for a 25bps rate hike next week at 96%, while opinions differ on the need for further increases, with bets for September and November rate hikes standing at 12% and 24%, respectively.

Analyzing the volume profile of the E-mini S&P 500, it appears that the market could encounter selling pressure around the lower volume area for the day, while aiming for the week’s low volume node (LVN) within the double distribution structure. The probability of refilling this area for the week is higher. However, the market may still rally due to lower-than-expected inflation readings.

In the short- to medium-term, a weaker dollar could act as a supportive factor for the US stock markets. From different perspectives, the current volatility tends to lean towards negativity, which could also support the market.

On the daily interval of the ES Futures contract, there is still an imbalance with prices trading above the developing VWAP of the year and the prior year’s value close area. This suggests a bullish sentiment, but it is important to exercise caution and remain aware of any signs of a potential recession, as it could drive the stock markets lower.

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